The value of house construction contracts in Tennessee declined last year when compared with 2009 levels and real estate experts are putting the blame on the high number of foreclosures and bank repossessions in the area. However, combined construction values covering all building segments posted a year-over-year increase in 2010.
With bank owned homes in Nashville and other low-priced residential properties found in various areas of the state competing with the new home market, analysts stated that the decline in home building values is not surprising at all. Last year, the total value of home construction contracts awarded to residential property builders declined by 1% compared with the 2009 level. The drop was largely due to an over 30% decline recorded in December.
Bank owned properties in Tennessee showed a massive impact on home building during the last month of 2010. December figures showed that contract values for residential building projects declined by 31% during the month compared with December 2009. The residential construction market was the only segment that posted a decline for the month as infrastructure contracts were up while non-residential projects remained flat.
The drop was mainly attributed by real estate analysts to the presence of foreclosed homes and bank repossessions and also to the growing number of unemployed, which cause demand for housing units to dwindle. For the full 2010 period, the value of contracts covering all construction segments jumped by 13% from 2009 levels to reach $8.4 billion.
For non-residential building contracts like commercial spaces, office buildings and religious properties, full 2010 values were up by 24% from year-ago levels. This segment is also affected by foreclosures and distressed property supplies, but not as much as house construction is affected by listings of bank owned homes. For non-building contracts or infrastructure construction projects like bridges, roads and utilities, values were up last year by 13% from year-ago levels.
Bank repossessions and foreclosed residential properties are expected to continue rising this year. Analysts are predicting that the new home market will also continue to decline. They stated that aside from the competition posed by low-priced distressed properties, unemployment is also hurting the home-building market of Tennessee.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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